Wednesday, July 18, 2012

Mortgage repurchase claims at Bank of America surged more than 40 percent in the second quarter, the bank said Wednesday, a fact that analysts repeatedly questioned but bank executives downplayed.

The putback requests reached $22.7 billion, up from $16.1 billion last quarter. Bank of America has reserved for $15.9 billion.

Mortgage putbacks occur after a bank sells a mortgage to an investor, often to be securitized. If the purchaser of the loan determines that the bank originating the mortgage misrepresented the quality of the loan, the buyer can attempt to force the bank to repurchase it. They're often called rep and warranty claims.

At Bank of America, the greatest volume of repurchase requests come from Fannie Mae and Freddie Mac. The Charlotte bank has said it has a disagreement on the validity of Fannie's claims. Chief Financial Officer Bruce Thompson also said a settlement announced Tuesday with Syncora also would have reduced that figure.

The issue gathered the lion's share of questions from analysts on a conference call with Bank of America's management Wednesday morning. Brennan Hawken, an analyst at UBS, noted that the bank's claims were more than six times higher than any of its peers, but had only set aside about twice as much money.

"All we can really say at this point, quite frankly, is that the reserving is based on our view of what the agreements are," Thompson said in reply. "There are disagreeents that are out there. I'm not sure there's a lot more to say on that."